An electronics firm is currently manufacturing anitem that has a variable cost of $.50 per unit and a selling priceof $1.00 per unit. Fixed costs are $14,000. Current volume is 30,000 units. The firm can substantially improve the productquality by adding a new piece of equipment at an additional fixedcost of $6,000. Variable cost would increase to $.60, but volumeshould jump to 50,000 units due to a higher-quality product.Should the company buy the new equipment?
Customary Pricing
There are various types of pricing strategies followed in the market. They are psychological pricing, odd pricing, free onboard pricing, customary pricing, prestige pricing, dual pricing, ruling pricing, negotiated pricing, mark up pricing, etc. each one can be explained as follows:
Multiple Unit Pricing
“Multiple-unit pricing is a practice where a company offers consumers a lower than unit price if a specified number of units are purchased.”
An electronics firm is currently manufacturing an
item that has a variable cost of $.50 per unit and a selling price
of $1.00 per unit. Fixed costs are $14,000. Current volume is 30,000 units. The firm can substantially improve the product
quality by adding a new piece of equipment at an additional fixed
cost of $6,000. Variable cost would increase to $.60, but volume
should jump to 50,000 units due to a higher-quality product.
Should the company buy the new equipment?
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